Pakistan seeks changes in free trade agreement with China

[waqar goraya]

Pakistan will try to convince Chinese authorities to revise the existing free trade agreement (FTA) on the less-than-equal reciprocity principle, Commerce Minister Pervaiz Malik told Dawn on Friday.

The move is aimed at overcoming the trade imbalance that exists between the two countries.

“We will demand an early-harvest programme in the existing FTA that will cover 100 items of Pakistan’s export interest,” Mr Malik said.

Negotiation teams briefed the minister about the trade agreements with China and Thailand. The briefing was part of the preparation ahead of the eighth round of negotiation on the second phase of the FTA to be held in Beijing on Sept 14-15.

Commerce Secretary Younus Dagha will lead a technical team to represent Pakistan in the secretary-level talks.

Mr Malik said China signed several bilateral and regional FTAs, which limited the benefit of preferences to Pakistan. China’s FTA with the Association of Southeast Asian Nations countries has also made the preferential treaty for Pakistan mostly irrelevant. For example, China charges 3.5 per cent duty on the import of yarn from Pakistan under the FTA while it also charges the same duty on imports from India without any treaty.

This shows the FTA has become mostly irrelevant for Pakistan. The minister said his ministry has worked out various proposals that will be presented during the upcoming round of negotiations.

The minister said Pakistan will urge China to enter into the early-harvest programme. “We also raised this issue with Pakistan’s foreign minister before his visit to China,” he said, adding that the ministry also sought help from the Foreign Office to make the treaty beneficial.

But another official told Dawn that Pakistan may not sign the second phase of the FTA as it fears that the move will further increase imports from China. Authorities in Beijing are unwilling to accept Islamabad’s demand for the revival of the preferential treatment for exportable products under the FTA, the official added.

As per the original plan, the second phase was supposed to be implemented from Jan 1, 2014. Both countries started negotiations for the second phase in 2011. The FTA covers more than 7,000 tariff lines at eight-digit tariff code under the Harmonised System (HS). Both sides have held seven rounds of negotiation on the second phase to break the deadlock.

An official statement issued after the meeting said the commerce minister showed satisfaction over the progress of the FTA negotiations. He directed the negotiating team to work vigorously to conclude the agreement in the best interest of Pakistan.

Currently, Pakistan has reduced the duty on 35pc products to zero per cent while China has reciprocated by reducing the duty on 40pc products of Pakistan’s exports to zero per cent. The official said Islamabad was also reviewing the services agreement with the Chinese authorities.

A commerce ministry report revealed that Pakistan could not utilise the concessions granted by China under the first phase. It only exported in 253 tariff lines, where the average export value was $500 or more, which was around 3.3pc of the total tariff lines (7,550) on which China granted concessions to Pakistan.

Pakistan’s key exports to China were raw material and intermediate products, such as cotton yarn, woven fabric, grey fabric etc. Value-added products were missing despite the fact that some of these products, like garments, were included in the concessionary regime.

On the FTA with Thailand, the minister said it was still in the early stage. However, he said interests of local industries will be protected under the proposed FTA. Thailand demands market access for the auto sector and rice.

https://www.dawn.com/news/1356432/pakistan-seeks-changes-in-free-trade-agreement-with-china

 

[waqar goraya]

[MENTION=26195]DW44[/MENTION] Will they be successful?

 

[shortbread]

This is simply political theatre! Too late to change the terms now and the Chinese have absoloutley no impetus to do so, they call the shots an everyone knows it.

The focus should be on successful delivery of CPEC and to win over Chinese investments and trust. Priority should be given to remaining a reliable ally of China and a trade imbalance in favour of the northern neighbours is not too high a price to pay for it.

 

[DW44]

Too little too late. This is a question people should have been asking 11 years ago. Now all we can do is nothing or like it.

 

[the Great Khan]

This is simply political theatre! Too late to change the terms now and the Chinese have absoloutley no impetus to do so, they call the shots an everyone knows it.

The focus should be on successful delivery of CPEC and to win over Chinese investments and trust. Priority should be given to remaining a reliable ally of China and a trade imbalance in favour of the northern neighbours is not too high a price to pay for it.

this. I suspect the horse has bolted on this one, but no harm in trying during the current climate.

 

[shortbread]

Too little too late. This is a question people should have been asking 11 years ago. Now all we can do is nothing or like it.

People make this sound like a funeral!

The onus is on the Pakistani industry to up their game, for far too long they found comfort and refuge by thriving in mediocrity and profiting from a lack of competition in the domestic market! 70 years and counting there is nothing of real note that the private corporate world of Pakistan can really boast of!

So why continue with more of the same?! What they need is a kick up the backside and that is exactly what the Chinese competition will give. Lets not forget this is a brilliant opportunity to access the humongous Chinese market!

CPEC is an opportunity, a very tough one but an opportunity nonetheless. It is vital to embrace it and quit complaining. Because that is exactly what the Chinese will be doing.

 

[DW44]

People make this sound like a funeral!

The onus is on the Pakistani industry to up their game, for far too long they found comfort and refuge by thriving in mediocrity and profiting from a lack of competition in the domestic market! 70 years and counting there is nothing of real note that the private corporate world of Pakistan can really boast of!

So why continue with more of the same?! What they need is a kick up the backside and that is exactly what the Chinese competition will give. Lets not forget this is a brilliant opportunity to access the humongous Chinese market!

CPEC is an opportunity, a very tough one but an opportunity nonetheless. It is vital to embrace it and quit complaining. Because that is exactly what the Chinese will be doing.

For our manufacturing sector, it pretty much is. I love this textbook theory about becoming more efficient to compete because it flies so blatantly in the face of all historic precedent which says that if you're exposed to competition too early, you don't have a snowball's chance in hell of doing that. Samsung was protected for 60 years in it's internal market before it could compete globally. Had they been competing with Toshiba in 1970, they would simply have gone out of business by 1975. The same applies to Toshiba itself who would have lasted all of five years had it been competing with GE before it was ready. Corporations take time to become competitive, several decades at the very least, and they require protection from more efficient foreign producers for most of that time. The onus is on the government to create an environment where that can happen. Our governments failed repeatedly because while they protected local industry from competition, they didn't force them to compete on the international market which is how the recently developed countries turned their dried fish and shampoo traders into the world's leading technology companies.

This isn't really about CPEC anyway, it's about the free trade deal which is a different, albeit related, issue. No country in history has survived opening it's market to the preeminent manufacturing nation of the time at such an early stage. It sounds nice in theory to say that this will give them the much needed kick up the backside that would force them to improve but that only happens in economics textbooks, not the real world. Realistically, Pakistani manufacturers would just keep going out of business as they have ever since the FTA was first signed.

 

[shortbread]

For our manufacturing sector, it pretty much is. I love this textbook theory about becoming more efficient to compete because it flies so blatantly in the face of all historic precedent which says that if you're exposed to competition too early, you don't have a snowball's chance in hell of doing that. Samsung was protected for 60 years in it's internal market before it could compete globally. Had they been competing with Toshiba in 1970, they would simply have gone out of business by 1975. The same applies to Toshiba itself who would have lasted all of five years had it been competing with GE before it was ready. Corporations take time to become competitive, several decades at the very least, and they require protection from more efficient foreign producers for most of that time. The onus is on the government to create an environment where that can happen. Our governments failed repeatedly because while they protected local industry from competition, they didn't force them to compete on the international market which is how the recently developed countries turned their dried fish and shampoo traders into the world's leading technology companies.

This isn't really about CPEC anyway, it's about the free trade deal which is a different, albeit related, issue. No country in history has survived opening it's market to the preeminent manufacturing nation of the time at such an early stage. It sounds nice in theory to say that this will give them the much needed kick up the backside that would force them to improve but that only happens in economics textbooks, not the real world. Realistically, Pakistani manufacturers would just keep going out of business as they have ever since the FTA was first signed.

DW44...... I respect your argument but it has been a protected market for nearly 70 YEARS!!!

How many more before we find our own Toshiba or Samsung?

Sometime ago Pakistan's No.1 software company was a dodgy alias for a fake educational certificate industry!

The future lies in encouraging Chinese corporates to invest in Pakistan and look at Pakistan as a low cost and efficient Industrial base. It is possible, cheap labour, easy access to ports....the potential is there and the Chinese have the know how and money. Irrespective of CPEC slowly and steadily the Chinese own the domestic market, the best solution is to play this to Pakistan's own advantage.

Winning Chinese trust must the the utmost focus now. It does sound like putting all the eggs in one basket, but its the only basket available!

 

[DW44]

DW44...... I respect your argument but it has been a protected market for nearly 70 YEARS!!!

Protection alone is not enough, I've already conceded as much. This is very much a policy failure since it's not exactly rocket science that if you're protecting your manufacturers, you make that protection conditional on competing in the international market. Our leaders saw that happen in front of their very eyes and yet stuck with half baked measures, first dabbling with a brand of protectionism that was certain to lead to cartelization and later making an even stupider move, messing around with free trade. The reason the former is preferable is that you can fix the damage at some point in the future. With free trade, if you commit hard enough early enough, there's no fixing the damage.

How many more before we find our own Toshiba or Samsung?

Bit of a moot point now since it will simply not happen now. Any company that tries to enter that segment will be crushed in the face of competition from Haier, Hisense and TCL.

Sometime ago Pakistan's No.1 software company was a dodgy alias for a fake educational certificate industry!

Very complex case with very little relevance to this discussion. Some of the parties involved in the case make it a very bad example in a debate over economic policy.

The future lies in encouraging Chinese corporates to invest in Pakistan and look at Pakistan as a low cost and efficient Industrial base. It is possible, cheap labour, easy access to ports....the potential is there and the Chinese have the know how and money. Irrespective of CPEC slowly and steadily the Chinese own the domestic market, the best solution is to play this to Pakistan's own advantage.
Problem is that China already has several Pakistans worth of third world countries with low cost labor in their western regions. The whole point of CPEC was to develop markets for when western China industrializes. The only hope is if the Chinese are actually interested in propping Pakistan up as a major economic power which is unlikely because right now their focus is solely on developing their economy and as far as cheap labor etc go, western China gets precedence over Pakistan.

Winning Chinese trust must the the utmost focus now. It does sound like putting all the eggs in one basket, but its the only basket available!

Bit of a damned if you do, damned if you don't situation.

 

[Slog]

The only realistic way currently is to impose tariffs on individual products under the guise of quality control as done in the case of steel products

Any other talk is delusional and waste of time